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on Business Economics |
| By: | Eslava, Marcela; Meléndez, Marcela; Ulyssea, Gabriel; Urdaneta, Nicolás; Flores, Ignacio |
| Abstract: | The relationship between firms and inequality has been a focus of recent attention globally. This chapter summarizes basic facts about this relationship for Latin America. Unlike advanced economies where superstar firm growth has prompted concerns over disproportionate income growth at the top, the facts we summarize illustrate that the main concern for Latin America is the extreme prevalence of tiny businesses whose workers and owners tend to populate the bottom income segments. The empirical likelihood that these businesses improve their productivity and grow to hire more workers and pay better wages is also very low. The region displays a deficit of employment generation in SMEs, by contrast to both microbusinesses (including self-employment) and large corporations. While the former tend to remunerate both workers and owners with very low incomes, the latter pay high wages but also exhibit low labor shares. |
| Keywords: | Inequality;Business Development;Latin America;Labor Force and Employment |
| JEL: | E02 J21 O54 |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13480 |
| By: | Nguyen, Quang Khai |
| Abstract: | In the context of emerging countries trying to attract foreign investors, building governance strategies and risk management of firms is an increasing concern. This study investigates the impact of financial flexibility strategies on the risk management effectiveness of firms and mechanism of these impacts by focusing on Vietnamese listed firms by applying the fixed effect and system GMM methods on a sample of 635 Vietnamese listed firms during the 2010–2021 period to derive empirical models under the high risk-high return approach. We also applied robustness tests to ensure that the results are reliable. We also investigate the level of risk management effectiveness among these firms during the 2010–2021 period. We found that financial flexibility strategies negatively impact risk management effectiveness of firms through reducing both firm risk and firm performance. Furthermore, we found that the degree of risk management effectiveness differs between low- and high-risk firms in Vietnam, with low-risk firms displaying more effective risk management compared to high-risk firms. Our research shows that financial flexibility strategies are not conducive to risk management effectiveness; however, firms can control the impact of flexibility strategies on risk management by controlling firm performance and risk. |
| Keywords: | financial flexibility, risk management effectiveness, listed firm, Vietnam |
| JEL: | G13 G18 G3 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121162 |
| By: | Max Riegel |
| Abstract: | I study pricing and product design choices of multiproduct firms in a model of directed search. Product design introduces vertical differentiation à la Gabszewicz and Thisse (1979) as well as Shaked and Sutton (1982). While all consumers have a preference for a more niche product design, consumers with lower search costs benefit relatively more. Firms gain from dispersion in tastes through product design and choose maximum differentiation in equilibrium. The firm with the broader product design sets a lower price and attracts consumers with high search costs. |
| Keywords: | product design, vertical differentiation, consumer search, directed search, search cost heterogeneity |
| JEL: | D43 D83 L15 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_556 |
| By: | Imperatore, Claudia; Pope, Peter F. |
| Abstract: | Research Summary Investment growth in family firms is constrained by family preferences to retain corporate control, which limits outside equity issuance and increases the expropriation risk perceived by external minority shareholders. Tenure-based voting rights (TVRs) weaken the link between voting rights and cash flow rights, facilitating new equity capital issuance without loss of control. We find that publicly listed family firms in Italy adopt TVRs to facilitate the continuation of investment growth while retaining family control. We also find that in family firms with fragile control, investment increases after TVR adoption. Our results indicate that control-enhancing mechanisms such as TVRs can help resolve the control–growth dilemma in family firms. Managerial Summary Family firms tend to invest less than other firms because funding new investment can lead to loss of family control. Tenure-based voting rights (TVRs) reinforce the control of qualifying family shareholders, giving them extra shareholder voting power. Deviation from the one-share-one-vote principle is generally regarded as detrimental to outside shareholders' interests. However, we find that TVR-adopting Italian family firms invest more, pay higher dividends, are more profitable and have more outside shareholders on the board of directors. In other words, violation of the one-share-one-vote rule using TVRs can benefit both family owners and outside shareholders. Policymakers could consider whether TVRs can help in promoting economic growth, especially in countries where family firms are important. |
| Keywords: | control-enhancing mechanisms; disproportional ownership; family firms; tenure-voting rights; underinvestment |
| JEL: | M40 |
| Date: | 2024–06–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123881 |
| By: | Diegmann, André; Pohlan, Laura; Weber, Andrea |
| Abstract: | We study how connections to German federal parliamentarians affect firm dynamics by constructing a novel dataset to measure connections between politicians and the universe of firms. To identify the causal effect of access to political power, we exploit (i) new appointments to the company leadership team and (ii) discontinuities around the marginal seat of party election lists. Our results reveal that connections lead to reductions in firm exits, gradual increases in employment growth without improvements in productivity. The economic effects are mediated by better credit ratings while access to subsidies or procurement contracts are documented to be of lower importance. |
| Keywords: | Politicians, Firm Performance, Identification, Political Connections |
| JEL: | O43 L25 D72 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300014 |
| By: | Tsz-Ning Wong; Lily Ling Yang; Andrey Zhukov |
| Abstract: | We study a model in which a firm can acquire conclusive evidence about its suppliers social and environmental impacts. We identify the disclosure mandate that maximizes market information. A disclosure mandate determines whether (i) the firms investigation effort is observable by the market and (ii) obtained evidence is disclosed to the market. When the supply chain visibility is low, the firm does not know its suppliers impacts. The combination of covert investigation and voluntary disclosure of obtained evidence incentivizes the firm to acquire evidence and constitutes the optimal disclosure mandate. When the supply chain visibility is high, the firm knows its suppliers impacts. Overt investigation and mandatory disclosure of obtained evidence together enable the firm to signal its private knowledge through the chosen investigation effort and maximize market information. The sharp contrast of these two cases highlights the importance of supply chain visibility in determining the optimal mandate. |
| Keywords: | Supply chain transparency, Mandatory disclosure, Voluntary disclosure |
| JEL: | D82 D83 Q58 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_560 |
| By: | Rozi Kumari (Guru Gobind Singh Indraprastha University); Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | Level playing field for women to participate in decision making and leadership positions is key to progress of a nation. Analysing widely used nationally representative datasets from the World Bank Enterprise Survey (WBES), we document that women ownership and participation in top management of registered private firms in India has drastically decreased, from low to a very meagre level, during the period from 2014 to 2022, despite sustained GDP growth and launch of several government programs to promote entrepreneurship. The pattern of decline is consistent across sectors (manufacturing and services) and size-groups (small, medium, and large) of firms, barring some variations. This is true regardless of the measure of women ownership considered and is not due to entry and exit of firms. |
| Keywords: | Firm ownership, Women, Private registered firms, Decision rights, Leadership, Entrepreneur |
| JEL: | O10 G32 J54 L26 B54 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ind:igiwpp:2024-008 |
| By: | Keiko Ito (Graduate School of Social Sciences, Chiba University); Masahiro Endoh (Faculty of Business and Commerce, Keio University); Naoto Jinji (Graduate School of Economics, Kyoto University); Toshiyuki Matsuura (Keio Economic Observatory, Keio University); Toshihiro Okubo (Faculty of Economics, Keio University); Akira Sasahara (Faculty of Economics, Keio University) |
| Abstract: | This study is the first to comprehensively investigate international trade at the firm-level using Japan fs customs data for the 2014-2020 period. We first decompose international trade into the intensive and extensive margin and show that the intensive margin accounts for around 30% and 40% of the variation in partner country-specific exports and imports, respectively. We next find a substantial concentration of trading firms: in 2017, the top 10% of exporters accounted for 96.6% of all exports, while the top 10% of importers were responsible for 94.6% of all imports. Finally, we match the customs data with other firm-level datasets and estimate the performance premia of exporting firms. Our findings indicate that exporting firms outperform non-exporting firms in all aspects we consider: sales, value added, the number of employees, the capital-labor ratio, productivity, and wages. Interestingly, the exporter premia for value added, labor productivity, and total factor productivity decreased between 2014 and 2016 and then increased until 2019, whereas the exporter premium for the average wage steadily increased. |
| Keywords: | Japan fs international trade, customs data, intensive and extensive margin of trade, exporter premia |
| JEL: | F10 F14 L25 |
| Date: | 2024–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:2024-017 |